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May 21, 2011

Micro-insurance rules nearly finished

CAMBODIA’S micro-insurance industry could launch as soon as August, as
officials say rules governing the sector are nearing completion.

The
Ministry of Economy and Finance aims to hold a meeting to receive
public feedback this month before finalising regulations drafted last
year, the Ministry’s Insurance Division Head In Meatra said.“We hope that we will launch [micro-insurance] sometime in August or later this year.”

In
Meatra emphasised the importance of raising awareness among Cambodia’s
rural population about the benefits of micro-insurance, adding the
insurance offered would include coverage for health, death and
livestock, among others.

The plan to launch micro-insurance had
been proposed by the private sector in order to improve the industry at
the grassroots level, he said, adding that many ASEAN countries, such as
Thailand, Vietnam and the Philippines, had already begun developing the
industry.

Strong regulation in the Philippines had led to a
successful micro-insurance industry, according to In Meatra. He said
Cambodia was on track to have similar legislation.

General
Insurance Association of Cambodia Chairman Chhay Ratanak said the group
had met with the Ministry in the last two weeks to discuss finalisation
of the rules.

“The plan is very good to help low-income people
get insurance, and the government especially wants to convince them of
the benefits of having insurance,” he said.

He said that while
micro-insurance offers fewer profits than other industries, many private
companies are still interested because it offers a way to help
Cambodia’s poor. He also pointed to a potential boost in tax revenues.

The
Finance Ministry’s In Meatra said the capital requirement being
discussed to operate a micro-insurance business was US$200,000, though
that had yet to be finalised.

Forte Insurance General Manager
Youk Chamroeunrith said his company received permission from the MEF to
implement a trial micro-insurance service in some of the provinces
surrounding Phnom Penh. The trial, now a month old, is being used to
gauge reaction of low-income people in the area, though it was still
too early to measure the results, he said.

Youk Chamroeunrith said the project is a joint venture with a local partner, however he declined to disclose its name.

“We’re not focusing on profit, given the premium is so small. It’s more about corporate responsibility,” he said.

In
2010, Forte signed a Memorandum of Understanding with Prasac,
Cambodia’s largest microfinance institution, to sell micro-insurance.

Prasac
would earn an 8-percent commission for every $100 premium, MFI General
Manager Sim Senacheert said last year. A rural client would pay a
premium of $6 per year, and, in case of hospitalisation, the insurer
would pay back $5 a day.

Infinity Insurance Chief Executive
Officer David Carter said that while he supported the micro-insurance
initiative, the regulation had to both encourage growth while “limiting
its horizon to small enterprise.”

“As the capitalisation level
for micro-insurers will be lower than the insurers in the current
market, the government has to ensure that there is no unfair competition
from these new entrants to the insurance market,” he said.